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Increasing the Minimum Wage hurts those most vulnerable in our society.

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Increasing the Minimum Wage hurts those most vulnerable in our society.

I realize this is a bit of a long OP, but I think the amount of research necessary to counter popular feelings needs to be significant.

The underlying claim that I will deal in this thread is that increases to the minimum wage negatively affect employment. Specifically, the minimum wage negatively affects employment for those workers most vulnerable to economic fluctuations, low skilled workers.

The minimum wage is a regressive policy that both lowers employment prospects for the lowest skilled workers and prevents those workers from acquiring the experience that will boost them into higher paying jobs.

There are two broad arguments I will make to support this argument. I will forgo the historical discussion of the racial origins of the minimum wage in the United States, or its current use as a tool of discrimination in other countries around the globe for the present time.

Microeconomic Law – Downward sloping Demand Curve

Just like with any other good or service, labor has a downward sloping demand curve. Some times of labor have steeper curves than others, generally lower skilled workers have a much steeper curve than college educated or experienced labor since they are more easily forgone or replaced with substitutes (machinery, etc).

The concept is quite simple. Would you buy less of something as the price increased? Of course you would. The same is true for labor. For each individual consumer in the normal market they won’t pay more for a good than it is worth to them. For each consumer of labor, the same concept applies, the manager, or owner or supervisor won’t hire someone for more than they contribute to the company’s revenue, known as marginal contribution. Here is a great video explaining it generally, but he concept is simple. It makes no sense to pay someone more money than they make for the company.

Bryan Caplan has done some interesting work with comparative data to show that labor, like every other demand curve is downward sloping. Specifically, he reviewed data not directly about the minimum wage to glean information about low skilled demand curves.

He makes several key points:
1) The effect of low skilled immigration on the wages of native low skilled workers. The lack of wage depression during several large scale immigration events shows that there is a large amount of elasticity in the quantity of low skilled labor employed (it also strongly argues against employer monopsony power, the ability of employers to dictate wages). Large elasticity in quantity demanded implies a steep downward slope on the demand curve.

2) The effects of increased regulation on low skilled workers. Specifically done in Europe, these studies shown that when regulation increased the cost of employing low skilled workers, a company quickly downsized its low skilled labor market. That is a classic downward sloping demand curve. And since regulation cost and wage cost are identical to an employer, the same principle applies to a minimum wage.

3) Price Control in general. Again, same point as above. Price controls have a large body of evidence showing that labor markets, especially low skilled labor markets suffer significantly when the marginal revenue is decreased due to a price control. That shows, yet again, a downward sloping demand curve for low skilled labor.

4) If you are a Keynesian, you have to accept this downward slope because it was central to Lord Keynes’ General Theory. He argued that wages had a downward “stickiness” which led to unemployment and mandated intervention. There is no way to argue that wage stickiness leads to unemployment, but mandated wage increases do not.

So we can see from this evidence that the idea of a downward sloping demand curve for labor is pretty robustly supported. Meaning that a vote for a minimum wage increase, is a vote against those on the margins of society having a job.

To overcome this logical point, someone would need to show how labor is the only good or service ever known that does not comply with microeconomic law (that person could then stand by for the nobel prize). That is such an overwhelming hurdle to cross you’ll notice that no one makes the objection. Some will argue that the effect is actually very, very small, but no serious economist argues that it is zero.

As such we can at least bound the argument on the bottom by saying that the Minimum Wage does, in fact, cause unemployment.

Macroeconomic Evidence

This is a relatively rare phenomenon in economics, but agreement with the claim “Does minimum wage hurt employment of low skilled workers” is about as universal as we can find. Recently, David Neumark (UC Irvine) conducted an environmental scan of the current state of economic research on the minimum wage. He reviewed more than 100 major academic studies (since 1992) and found that 85% of them find a negative effect on employment of low skilled workers.

And Prof. Neumark is not the only economist to have done an environmental scan (a review of all academic literature on a subject) in recent years. Congress did one back in 1995 as well and found that the effects go beyond simply not hiring or letting go. At the margin, where people are retained at the higher income, other pecuniary benefits such as training, time off and working conditions suffered as minimum wages increased.

It will also indicate that the minimum wage has wide-ranging negative effects that go beyond unemployment. For example, higher minimum wages encourage employers to cut back on training, thus depriving low wage workers of an important means of long-term advancement, in return for a small increase in current income.

Scott Sumner has done some excellent work on the data coming out of Europe, where minimum wage laws vary significantly, and data is relatively reliable.

There are nine countries with a minimum wage (Belgium, Netherlands, Britain, Ireland, France, Spain, Portugal, Greece, Luxembourg). Their unemployment rates range from 5.9% in Luxembourg to 27.6% in Greece. The median country is France with 11.1% unemployment.
There are nine countries with no minimum wage (Iceland, Norway, Sweden, Finland, Denmark, Austria, Germany, Italy, Switzerland.) Five of the nine have a lower unemployment rate than Luxembourg, the best of the other group. The median country is Iceland, with a 5.5% unemployment rate. The biggest country in Europe is Germany. No minimum wage and 5.2% unemployment.

Conclusion

So what does all this economic babble mean? I’ll make it brutally simple. If you support a minimum wage, you support hurting the lowest skilled workers in our economy (generally young minorities) in favor of those who are more moderately skilled. You prevent them from getting a foot on the economic ladder. You prevent them from competing with those who can spend money towards their personal capital.
To use an illustration, generally, you are limiting the options for a young black female and helping a middle income white male (which incidentally, it was originally designed to do).
There are plenty of other moral issues with the minimum wage as well, but I think we can start with these.

Common Objections

1) But what about Card and Krueger?

Card and Krueger conducted a study that found there was no noticeable effect on unemployment (not low-skilled unemployment, the broader category) given minimum wage changes.

Thanks for your e-mail. You allege that I and other “conservative economists are pigheaded in [our] refusal to recognize the revolutionary findings of scientific political economists.” You describe these findings as “proving beyond a doubt” that “raising minimum wages does not destroy the jobs of poor, struggling workers.” And you single out for praise the research of economists David Card and Alan Krueger.

Card and Krueger did indeed conduct empirical studies purporting to overturn the proposition that raising the legislated minimum-wage reduces the employment options of low-skilled workers. But I believe that their work falls far short of being the successful revolution in labor economics that you think it to be.

First, several empirical studies before and since the publication of Card’s and Krueger’s have shown results contrary to theirs.* It’s simply untrue that there is such a bulk of empirical research in support of the Card-Krueger thesis that it has been proven “beyond a doubt.” More importantly, evidence for their proposition is still so tentative that it is, in my opinion, insufficient to justify forcible interference by government in private labor contracts among consenting adults.

Second, Card’s and Krueger’s method of measuring the effects of raising minimum-wages – which involves surveying employers, before and after minimum-wage increases, to gauge their reactions to higher minimum-wages – is inadequate. To explain this inadequacy I quote economist Thomas Sowell; it’s a lengthy quotation, but worthwhile to read in full:

“Imagine that an industry consists of ten firms, each hiring 1,000 workers before a minimum wage increase, for an industry total of 10,000 employees. If three of these firms go out of business between the first and second surveys, and only one new firm enters the industry, then only the seven firms that were in existence both ‘before’ and ‘after’ can be surveyed and their results reported. With fewer firms, employment per firm may increase, even if employment in the industry as a whole decreases. If, for example, the seven surviving firms and the new firm all hire 1,100 employees each, this means that the industry as a whole will have 8,800 employees – fewer than before the minimum wage increase – and yet a study of the seven surviving firms would show a 10 percent increase in employment in the firms surveyed, rather than the 12 percent decrease for the industry as a whole. Since minimum wages can cause unemployment by (1) reducing employment among all the firms, (2) pushing marginal firms into bankruptcy, or (3) discouraging the entry of replacement firms, reports based on surveying only survivors can create as false a conclusion as interviewing people who have played Russian roulette.”**

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

I am more than happy to detail the other statistical problems with Card and Kreuger, as well as to highlight how isolated their findings are if someone would care to defend them. That said, I’ll leave the above as an initial rebuttal.

2) But it could be worth it, perhaps those who lose their jobs are so small as to make the benefit to those who don’t worth it?

Laying aside the objection that this still proposes a trade off between the most marginalized in our society for the benefit of those who are less marginalized, the numbers don’t work out.

None; minimum wages are negotiated in various collectively bargained agreements and applied automatically to all employees in those occupations, regardless of union membership; while the agreements can be either industry- or sector-wide, and in some cases firm-specific, the minimum wage levels are occupation-specific.

Norway

None; wages normally fall within a national scale negotiated by labor, employers, and local governments

Sweden

None; set by annual collective bargaining contracts.

Finland

None; however, the law requires all employers, including non-unionized ones, to pay minimum wages agreed to in collective bargaining agreements; almost all workers are covered under such arrangements.

Denmark

None; instead, negotiated between unions and employer associations; the average minimum wage for all private and public sector collective bargaining agreements was 109 kroner ($19) per hour.

Austria

None; instead, nationwide collective bargaining agreements set minimum wages by job classification for each industry and provide for a minimum wage of €1,000 per month—Wages where no such collective agreements exist, such as for domestic workers, janitorial staff, and au pairs, are regulated in pertinent law and are generally lower than those covered by collective bargaining

Germany

None; except for construction workers, electrical workers, janitors, roofers, painters, and letter carriers. Minimum wage is often set by collective bargaining agreements in other sectors of the economy and enforceable by law.[4]The law states that paying a worker an "immoral wage" is illegal. There is no general consensus what constitutes "immoral" payment. One judge at a court in Krefeld, Germany, ruled that a cashier at a supermarket has to earn the equivalent of approximately 7USD per hour. The federal courts in Germany ruled that any wage lower than 75% of the average wage or salary for a specific occupation constitutes illegal payment. However, since there is no well defined legal minimum wage as of February 2013, courts are usually the ones who have the final say and will only rule for individual cases.

Italy

None; instead set through collective bargaining agreements on a sector-by-sector basis

In short there appears to be a lower bound set by these collective bargaining agreements -- i.e. a minimum wage. So are you arguing that rather than having a government imposed minimum that applies to all industries that each industry should be collectively bargain for that minimum and that these industries need to unionize in order to be able to negotiate effectively?

Are you actually for a minimum of some kind since that also results in "Five of the nine have a lower unemployment rate than Luxembourg, the best of the other group. The median country is Iceland, with a 5.5% unemployment rate. The biggest country in Europe is Germany. No minimum wage and 5.2% unemployment."?

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

I will pipe in and say that setting minimum wages by collective bargaining is probably smarter than flat fiat minimum wages for a whole range of reasons.

Squatch makes a pretty decent case but it's only half the story. He points out the flaws externalizes of a minimum wage but doesn't address the problem of wages that fall significantly below cost of living.

As a nation becomes wealthy the baseline cost of living for a person who wants to not fall afoul of social and legal standards constantly rises along with that nations wealth. If you get into situations where a significant portion of the population has skills insufficient to earn a minimum living standard you get a great deal of social upheaval and strife along with a host of other externalizes such as crime, disease, and unrest.

So while minimum wages may be a crude economic tool, its also something that is more or less inevitable unless you address the underlying challenge of a standard of living that is high enough that someone entering into the workforce with little capital investment has little hope of earning.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by SIG

As a nation becomes wealthy the baseline cost of living for a person who wants to not fall afoul of social and legal standards constantly rises along with that nations wealth. If you get into situations where a significant portion of the population has skills insufficient to earn a minimum living standard you get a great deal of social upheaval and strife along with a host of other externalizes such as crime, disease, and unrest.

So lets get this straight, here the "minimum living standard" is a reference to the laws in place that make being too poor "illegal". For example, if you are poor, but own a house and that house is in disrepair, then the state will evict you because it doesn't meet "minimum living standards".

Is that correct? That being the case, minimum wage isn't the problem, the real problem is the state making it illegal to be poor.

otherwise, what "minimum living standard" are you appealing to?

Originally Posted by SIG

So while minimum wages may be a crude economic tool, its also something that is more or less inevitable unless you address the underlying challenge of a standard of living that is high enough that someone entering into the workforce with little capital investment has little hope of earning.

Qualify "someone entering the workforce"? Who do you have in mind? The 40 year old with 2 kids and wife to support?
If so, what the hell is he doing with no skills at the age of 40?

If it is the teenager still in highs school, then the bottom is where you START! The job pays in both money AND experience (Ie capital investment by another into you).
What need does he have of capital investment?

Second, what is this capital investment you have in mind? What is it's purpose, why is it needed?

Your post seems to forget the audience of low to no skilled workers and who they are. The idea of a living wage to one entering the work force is ridiculous, one should not expect a "living wage".

I apologize to anyone waiting on a response from me. I am experiencing a time warp, suddenly their are not enough hours in a day. As soon as I find a replacement part to my flux capacitor regulator, time should resume it's normal flow.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by Sigfried

I will pipe in and say that setting minimum wages by collective bargaining is probably smarter than flat fiat minimum wages for a whole range of reasons.

I think I'd agree with collective bargaining (though I'm surprise to see someone on the right supporting that) but that should be done to raise those salaries above the country's actual minimum. Indeed, these CB-wages tend to be much higher than the actual minimum so they're definitely better for the worker.

Squatch makes a pretty decent case but it's only half the story. He points out the flaws externalizes of a minimum wage but doesn't address the problem of wages that fall significantly below cost of living.

Hmm, I'm not sure about that just yet since the other countries that also have no minimum wage nor collective bargaining aren't really included in the facts he quotes to link wages to employment rates. For example, Tonga, which has no minimum wage yet the unemployment rate is 14% (src). Right now, the argument that's being made doesn't seem stand up to the macro-economic evidence he presents. And the non-cherry picked facts seem to not support the argument at all.

The argument also has other weaknesses but if there is no evidence to support them anyway there's no point addressing those.

As a nation becomes wealthy the baseline cost of living for a person who wants to not fall afoul of social and legal standards constantly rises along with that nations wealth. If you get into situations where a significant portion of the population has skills insufficient to earn a minimum living standard you get a great deal of social upheaval and strife along with a host of other externalizes such as crime, disease, and unrest.

So while minimum wages may be a crude economic tool, its also something that is more or less inevitable unless you address the underlying challenge of a standard of living that is high enough that someone entering into the workforce with little capital investment has little hope of earning.

I agree, and also without a minimum wage, there is no incentive to work at all given other social safety nets and programs. So really MW is only one factor affecting employment otherwise those countries with zero as a minimum (e.g. Tongo above) would have low unemployment rates.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

I think there's currently the theory going around that raising the Earned Income Tax Credit would be a better way to handle this problem rather than increasing the minimum wage. It sidesteps a lot of the objections that plague the minimum wage.

Of course I'd be in favor of paying for such a increase by making other adjustments to tax rates, like raising the tax rate on capital gains, but then that's where conservatives would get themselves in a tizzy. Ho hum. Can't ever win.

Yes, Europe is certainly not a free labor market. But you'll notice that many of the countries with a minimum wage also have collective bargaining agreements as well as other redistributive programs, so that we can definitely agree that minimum wage is not the only factor affecting unemployment. Scott Sumner makes the same argument in the link, and that a telling factor emerges when you tie the time of minimum wage changes to the unemployment changes. Germany had high unemployment, it lowered it's minimum wage as part of an incremental economic reform package.

As for collective bargaining vs minimum wage. I would prefer the former, though they are both non-optimal solutions when it comes to reducing poverty and disenfranchising the lowest skilled workers. Don't confuse our advocacy of other ideas with a lack of preferences towards other options.

But let's get back to the main question at hand. Do you disagree with the premise stated in the OP that "he minimum wage negatively affects employment for those workers most vulnerable to economic fluctuations, low skilled workers?"

If so, why?

Originally Posted by Sigfried

He points out the flaws externalizes of a minimum wage but doesn't address the problem of wages that fall significantly below cost of living.

I could certainly make an argument for the economy reacting positively to provide for those people (Walmart) and that it isn't very productive for labor purchaser's to hire people who will starve to death. I could also raise questions about what the "cost of living" entails, given the standard of living in the US.

But rather, I will take the tact that while a wage of, say, $4/hour falls below what many people would consider the standard of living, that I did make the point that it is far closer to that standard than the alternative $0/hour.

Originally Posted by JimJones8934

For example, Tonga, which has no minimum wage yet the unemployment rate is 14% (src).

Tonga isn't really a good comparable to Western Europe is it? I could also compare the super-low unemployment rates for the US in 1802 and it's lack of a minimum wage, but the macro-environment is so different as to make that data incomparable.

Originally Posted by JJ

Right now, the argument that's being made doesn't seem stand up to the macro-economic evidence he presents. And the non-cherry picked facts seem to not support the argument at all.

I'm curious if you saw the data besides that one quote. Did you see the summary of Economics journals? Did you see Prof. Neumark's Work? The Congressional report?

Originally Posted by JJ

The argument also has other weaknesses but if there is no evidence to support them anyway there's no point addressing those.

I'm also curious, do you think that the labor market does not comply with the supply/demand curve laws within Microeconomics? If not, why not?

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by MindTrap028

So lets get this straight, here the "minimum living standard" is a reference to the laws in place that make being too poor "illegal". For example, if you are poor, but own a house and that house is in disrepair, then the state will evict you because it doesn't meet "minimum living standards".

Is that correct? That being the case, minimum wage isn't the problem, the real problem is the state making it illegal to be poor.

That is correct.

The source of most of said law is protecting the value of property held by those who are not poor, though some of it is purely a matter of public safety.

Qualify "someone entering the workforce"? Who do you have in mind? The 40 year old with 2 kids and wife to support?

No, generally I mean young people working for the first time living away from home or just starting their family. Now a 40 year old could have been a home maker and then is widowed or the like and must enter the work force for the first time. In that case they would qualify as entering the workforce.

If it is the teenager still in highs school, then the bottom is where you START! The job pays in both money AND experience (Ie capital investment by another into you).
What need does he have of capital investment?

Unless they are living on their own (which does occasionally happen) they don't really need a living wage. I wouldn't say a job pays experience unless you are being taught a trade as part of the work. some jobs do that, others not so much.

The teen could use capital investment such as a car to get to his job, or a phone to respond to on-call situations, or money for good work clothes, or money for work tools, or to same money for college, or even money to start a small business.

Second, what is this capital investment you have in mind? What is it's purpose, why is it needed?

Do I truly need to explain the value of capital investment to a capitalist? I think the above illustrates pretty well some examples.

Your post seems to forget the audience of low to no skilled workers and who they are. The idea of a living wage to one entering the work force is ridiculous, one should not expect a "living wage".

Really, so we should all begin our careers homeless and running into trouble with the law? That doesn't sound like a workable society.

We should be able to fairly quickly get employment that is enough to rent a small place, afford transportation, afford food, and not get into trouble with the regulations surrounding those things. Otherwise you end up with a lot of folks trapped in something of a cycle of poverty. I've been there, I had to put myself through college and pay for all my expenses. My parents would not allow me to live at home nor did they pay for my accommodations. I ended up with quite a bit of credit card debt and a nice pile of collections for this and that. I eventually dug out from all that but I'm fairly exceptional and had no kids etc... College is also a blur I barely remember since I hardly had time to sleep and I ate terrible crap food for 4 years.

Society needs to be functional for average people to get a pretty average outcome and ideally keep the least able from reaching a state of true desperation. The US is pretty well off and for the most part manages this but we have slid back a bit in keeping the lower middle at pace with the rising cost of living in our country that is often driven partly by the interests of the very well off.

I've got nothing against wealth, I'm by many measures wealthy myself. I make a good 5 or more times the minimum wage these days and have no kids to worry about (though I do have a wife to support). I own a house and many very nice things and generally don't have to do more than not over spend. But politics is about making judgement for the good of all people rich and poor alike so its important to consider the full spectrum and the impact any policy has.

Ideally we will have an economy that allows people starting a family to support said family at a minimum standard.

I think I'd agree with collective bargaining (though I'm surprise to see someone on the right supporting that) but that should be done to raise those salaries above the country's actual minimum. Indeed, these CB-wages tend to be much higher than the actual minimum so they're definitely better for the worker.

I'm always an advocate that workers need to stand up and represent their own value. Too many people choose to take salaries that are not reasonable for the work demanded. Then again having been a manager some workers contribute far below their salary. I see more of the former than the latter.

PS: I'm not conservative. Politically I'm moderate with a liberal tilt, especially on "social" issues. I do favor capitalism but I think you have to have some policy layered on there sometimes.

Hmm, I'm not sure about that just yet since the other countries that also have no minimum wage nor collective bargaining aren't really included in the facts he quotes to link wages to employment rates.

I didn't see that part as the strong argument in his case. The strong part was the indications that labor is an elastic good and that price changes in labor strongly impact demand. When comparing countries you have the problem of all the other myriad factors that impact unemployment rates. Comparing Tonga to the US is rather apples and oranges. Its a small island with less people than most american cities. I doubt minimum wage would rank as a primary factor.

What Squatch's analysis shows is that it should decease employment for low wage workers.

I agree, and also without a minimum wage, there is no incentive to work at all given other social safety nets and programs. So really MW is only one factor affecting employment otherwise those countries with zero as a minimum (e.g. Tongo above) would have low unemployment rates.

Safety nets are another mechanism to deal with the issue, but yes they can lead to lower productivity as people opt for the meal ticket rather than the low paying job. Labor prices aren't the only reason for unemployment, it's just a contributing factor.

But rather, I will take the tact that while a wage of, say, $4/hour falls below what many people would consider the standard of living, that I did make the point that it is far closer to that standard than the alternative $0/hour.

Not really. You have to consider what criminal and black market activity pays and its risks vs the risks of work as an opportunity cost. Or even if you take crime out of the picture, there is opportunity cost to work. You often have limited food options, you must pay for transportation, you have to have appropriate attire, it takes away 9+ hours of your day which you could spend working for your own benefit.

The biggest problems we have in this area stem from broken families. Single parents face significant costs to care for their kids while they are at work, often more than they can earn if they are at the bottom of the wage scale. While we should do everything we can to help avoid the situation itself, we also need to do something to deal with what happens when all that fails.

Its a multifaceted social problem.

BTW: In Seattle we recently had on district (the airport) go to a $15 min wage. Should be interesting to see what impact it has. We also have legal recreational pot sales coming soon and I'm very curious to see how that shakes out as well. Interesting times for an Economist.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by ZealousDemon

I think there's currently the theory going around that raising the Earned Income Tax Credit would be a better way to handle this problem rather than increasing the minimum wage. It sidesteps a lot of the objections that plague the minimum wage.

Explain how it is good idea to reduce income taxes for some people to zero and, even worse, increase tax refunds to people who didn't pay any taxes to begin with. EITC is just a welfare program disguised as a tax credit.

But let's get back to the main question at hand. Do you disagree with the premise stated in the OP that "the minimum wage negatively affects employment for those workers most vulnerable to economic fluctuations, low skilled workers?"

Although I admire the op, the problem I have is that the supportive material comes from Europe where businesses do not run efficient payroll control to begin with. That is very different than in the US, where typical fast food and retail businesses employing low-skilled workers run very tight labor control. Managers access computerized real time reports showing sales and labor whenever they need to, and maintain labor percentages watched closely by superiors. Would a minimum wage hike cause them to cut labor hours? Not likely, because they are already running labor hours as low as possible. If they could cut any labor hours, they already would have.

What a hike in the minimum wage would do, besides raising the wage floor for the low-skilled, is force pay raises for those who supervise the minimum wage employees, because they would demand a raise also, and then the second level supervisor, and so on up the ladder. This would happen in every business and every industry that employs low skilled workers. And as a result, all of those companies would have to raise their wholesale and retail prices. That price inflation would offset the increased take home pay of those receiving a wage increase, causing a roughly net zero gain for the employees. In the US, the minimum wage isn't much more than a political scam used by populist politicians.

"If we lose freedom here, there is no place to escape to. This is the last stand on Earth." - Ronald Reagan

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by SIG

That is correct.

The source of most of said law is protecting the value of property held by those who are not poor, though some of it is purely a matter of public safety.

If those restrictions are the cause, then we should remove them instead of adding more restrictions of some other use of liberty.

I don't see either as justification for limiting the freedom of others regarding their personal property. The "public safty" may seem like an easy justification, but my private house has little to do with the public or it's safty.

Originally Posted by SIG

No, generally I mean young people working for the first time living away from home or just starting their family. Now a 40 year old could have been a home maker and then is widowed or the like and must enter the work force for the first time. In that case they would qualify as entering the workforce.

It seems to me that I (as an employer) shouldn't be limited because a kid tries to move out of his parents house before he is ecconomically prepared.
As for starting afamily, same again. I don't see why my liberty should be disregarded because a 16-20 year old knocks up his GF before he has skills, or is stupid enough to actually try for a child with his wife before he has a stable environment to raise them in.

Really that is holding me responsible for their life choices, and that is wrong.

As to the widow example, your right they would be considered entering the work force.. maybe even for the first time.
But I don't think you are seriously suggesting that we should form the foundation of our ecconmy on such a fringe example.
I understand that you are combining these 3 above, and even this one falls to a similar objection to the others.

Originally Posted by SIG

Unless they are living on their own (which does occasionally happen) they don't really need a living wage. I wouldn't say a job pays experience unless you are being taught a trade as part of the work. some jobs do that, others not so much.

The teen could use capital investment such as a car to get to his job, or a phone to respond to on-call situations, or money for good work clothes, or money for work tools, or to same money for college, or even money to start a small business.

I'm still trying to grasp this capital investment point.

To the experience portion.
I think job experience is at least a 50/50 shot that your job is preparing you for the next step in that corporate ladder.
I started in a grocier store and could have run the dairy department had I stayed a few more years, instead I left to become a bus boy and became a waiter.
Each job leading to the next throught the experience I earned simply working there.

I don't pretend that every single job is like that, but that is why people go from company to company in order to climbe the ladder.

To the capital
I just don't see the capital investment of a decent pair of pants, shirt and shoes as unatainable. If a job is really that low paying they are likely to provide those things, or not care what you ware so as to make handme downs and garage sale level stuff more than acceptable.
Such jobs would probaby have a good shot of not requiring a shirt, much less a uniform.

Again, cell phones etc, the low end jobs we are talking about .. you get picked up at your house by the boss as much as anything else. Working in construction and seeing those that don't get min wage and are basically "black market labor".. they don't need a phone, they are picked up.

So I think your expectations are inflated as to what kind of work is "bottom of the barrel" work.

As to starting a small buisness.. I have seen it done, but it certainly isn't the norm for someone with no experience at all so as to be only worthy of min wage or less.

Originally Posted by SIG

Really, so we should all begin our careers homeless and running into trouble with the law? That doesn't sound like a workable society.

Exactly. I started off homeless, that is why I stayed with my parents till I could support myself.

... waaiit a second. What society do you live in? Do all parents or even the average one kick their children to the street at 16? I know it happens, but how common is it?
And shouldn't we encourage group homes (Ie a co-operation of free people) instead of limiting the freedom and liberty of others in the face of misfortune of a few?

Originally Posted by SIG

We should be able to fairly quickly get employment that is enough to rent a small place, afford transportation, afford food, and not get into trouble with the regulations surrounding those things.

I would say that is a necissary aspect of a successful ecconomy. But that is achieved through gaining skills and moving up the ladder, not something you should expect at the very start.
Pushing buggies shouldn't pay rent and food and car... sorry, it simply isn't worth it.
When I did that I earned enough to pay my car insurance and gas.. and that was about it.

Originally Posted by SIG

Otherwise you end up with a lot of folks trapped in something of a cycle of poverty. I've been there, I had to put myself through college and pay for all my expenses. My parents would not allow me to live at home nor did they pay for my accommodations. I ended up with quite a bit of credit card debt and a nice pile of collections for this and that. I eventually dug out from all that but I'm fairly exceptional and had no kids etc... College is also a blur I barely remember since I hardly had time to sleep and I ate terrible crap food for 4 years.

I worked as a waiter, married with no kids.. and paid all my own expenses. About the time I had my first child I stopped going to college (because I didn't plan on spending another 10 years for my Psy masters).

but what is the cycle of poverty? Is that the "rich dad/poor dad" type thing? As I understand it the biggest contributer to the cycle of poverty.. isn't poverty itself but marrage and children.
Have a child without being married = .. be poor.
It certainly isn't the lack of higher education like college. Personally I feel that college held me back and I would have been richer now if I had gone strait into the work force and started climbing the ladder.

Originally Posted by SIG

Society needs to be functional for average people to get a pretty average outcome and ideally keep the least able from reaching a state of true desperation. The US is pretty well off and for the most part manages this but we have slid back a bit in keeping the lower middle at pace with the rising cost of living in our country that is often driven partly by the interests of the very well off.

Yes but this also has a bit to do with what the "average" person is going to be. If you enable people to be dead beats, or lazy then we will have an average lazy people.
Would you rather the average be.
1) Grow up with a single mom, Get knocked up(or knock someone else up) at 16-20, have several children with different people, work pushing buggies with no insentive to advance.
or
2) Grow up with two parents, find a dream and start at the bottom sweeping floors for the privilage of learning a skill, get established and start a family.

Now, I'm not saying a min wage does one or the other. I'm saying that isn't that what we should really keep in mind.. what the social effects are actually going to be or have been?

Originally Posted by SIG

I've got nothing against wealth, I'm by many measures wealthy myself. I make a good 5 or more times the minimum wage these days and have no kids to worry about (though I do have a wife to support). I own a house and many very nice things and generally don't have to do more than not over spend. But politics is about making judgement for the good of all people rich and poor alike so its important to consider the full spectrum and the impact any policy has.

Well, this is sort of a side point to the thread, but I see politicians job as to protect the rights of all people equally regardless of class. The idea of picking one class over another is what "politics" is about, and that is a major cause of the problems in our society.
As much as Democrats have demonized the rich to achieve their social agenda.. they are still protecting their own version of the "rich". We need to look no further than the bank bailouts for that(as an intersection of dems and republicans protecting rich). A person for the little guy would have paid the mortgage of the little guys(basically guaranteeing it)
Instead, they gave the money to the banks who then kicked the little guy out.

Originally Posted by SIG

Ideally we will have an economy that allows people starting a family to support said family at a minimum standard.

That will never come from a min wage though, because in the end it is the jobs that support such a thing that must be created, and min wage demonstrably destroys jobs.
If you want to start a family at a minimum standard you simply can not start it until you have reached the level of skill in the society that supports that.
There are simply too many jobs that need to be done that are not worth the money to support a family. Pushing Buggies is such an example. The job will exist at a very low pay, or it will not exist at all, and customers will do it for free.

Do you agree with that? If not why?
Do you agree with the buggy pushing example?

Would you agree that by raising min wage so as to destroy all buggy pushing jobs will change our culture to one that doesn't expect such a service at all.
If so, how many other such services/industries have been destroyed or maybe just limited? Technical support that speaks english comes to mind.

I apologize to anyone waiting on a response from me. I am experiencing a time warp, suddenly their are not enough hours in a day. As soon as I find a replacement part to my flux capacitor regulator, time should resume it's normal flow.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by Squatch347

Yep, the link notes those agreements, along with other redistributive programs within the countries referenced.

Yes, Europe is certainly not a free labor market. But you'll notice that many of the countries with a minimum wage also have collective bargaining agreements as well as other redistributive programs, so that we can definitely agree that minimum wage is not the only factor affecting unemployment. Scott Sumner makes the same argument in the link, and that a telling factor emerges when you tie the time of minimum wage changes to the unemployment changes. Germany had high unemployment, it lowered it's minimum wage as part of an incremental economic reform package.

Right, so the point is fallacious viz-a-viz your OP. Rather than comparing MW vs non-MW, you are comparing MW vs CB. In suggesting that the CB countries are non MW countries is untrue - there is indeed a minimum wage - it's going to be the lowest out of all the industries. That's different from having a zero minimum wage that other countries have.

What I'm not understanding is how this supports your OP.

As for collective bargaining vs minimum wage. I would prefer the former, though they are both non-optimal solutions when it comes to reducing poverty and disenfranchising the lowest skilled workers. Don't confuse our advocacy of other ideas with a lack of preferences towards other options.

Except that you're not presenting it as an alternative option - you hid it by suggesting that those CB countries were zero-MW countries; it's why it struck me as odd. And if you did mean that show that CB is better than MW then why not make that explicit. In making that comparison directly after those countries that had MW and high unemployment, you are making the suggesting that those countries are zero-MW countries, not CB countries as it turned out only after I looked into the details.

But let's get back to the main question at hand. Do you disagree with the premise stated in the OP that "he minimum wage negatively affects employment for those workers most vulnerable to economic fluctuations, low skilled workers?"

If so, why?

I'm disagreeing that your "Macroeconomic Evidence", your words, do not support your argument. If you admit that you are making an argument with no real-world evidence to support it then we can carry on (or at least withdraw Sumner's two misleading paragraphs) then perhaps its worth looking at the argument in of itself. Until then, you have confused me even further since you seem to now argue that CB is better than MW but that's not your argument, which is zero-MW is better than MW. Right?

Tonga isn't really a good comparable to Western Europe is it? I could also compare the super-low unemployment rates for the US in 1802 and it's lack of a minimum wage, but the macro-environment is so different as to make that data incomparable.

Whilst it's true that Tonga is different from 1802 and Modern Western Europe, that is not the argument you are making. I don't really see anything that says that it is only true for Europe. If you need to further qualify the conditions where this is true then you should do so after clearing up the Sumner issue.

JJ:Right now, the argument that's being made doesn't seem stand up to the macro-economic evidence he presents. And the non-cherry picked facts seem to not support the argument at all.
I'm curious if you saw the data besides that one quote. Did you see the summary of Economics journals? Did you see Prof. Neumark's Work? The Congressional report?

No, from the Wikipedia article, it pointed to a government website with all the detailed facts about each country and employment rates for each country are easily found. It's all out there. I think a more useful description would be a chart of the minimum wage (or a calculated on from CB countries) vs employment-rate over time. Then the facts should pop out.

I'm also curious, do you think that the labor market does not comply with the supply/demand curve laws within Microeconomics? If not, why not?

I've already mentioned this, an MW has to be greater than the social safety net that a country provides, otherwise there is no incentive to work. It's why Americans aren't picking tomatoes for $1 an hr - it's the Mexican undocumented workers who don't have such a safety net. That's why the zero-MW argument, if that's what you're saying, makes no sense: it doesn't work in the Western world, due to the safety net mentioned; and it doesn't work in Tonga, where there are no regulations at all, where things are as free-market driven as it can possibly be. But this should be saved for later until the issues above have been resolved.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by MindTrap028

If those restrictions are the cause, then we should remove them instead of adding more restrictions of some other use of liberty.

Yep, that was partly my point.

I don't see either as justification for limiting the freedom of others regarding their personal property. The "public safty" may seem like an easy justification, but my private house has little to do with the public or it's safety.

A. I think we need less laws that make it difficult to be poor, but again, there are strong vested interests among the middle class that make these laws.

Things like mandatory car insurance. Its there to protect people with reasonably nice cars from poor people who drive poorly but it hurts all the poor people who drive quite nicely. If your home doesn't meet fire code it may not only burn down but could burn down others houses too. Emissions standards protect us all from smog and acid rain and so forth but its a cost you have to pay. Vagrancy laws protect property holder values from degradation by guys pissing in public and so forth. Most people when faced with laws like these opt to keep them because they worry about the impact on their lives if they aren't there but all of them make life harder for the poor who don't have so much to protect.

It seems to me that I (as an employer) shouldn't be limited because a kid tries to move out of his parents house before he is ecconomically prepared.

Not every kid has any choice in the matter. I was pretty much an angel as a kid but my folks insisted I move out when I went to school. Others don't have parents, and some have parents no sane person would want to live with. My wife's mom tended to take her money so not much to be gained there. Again, in politics you have to consider everyone to an extent. Its your job to give a ****.

As for starting afamily, same again. I don't see why my liberty should be disregarded because a 16-20 year old knocks up his GF before he has skills, or is stupid enough to actually try for a child with his wife before he has a stable environment to raise them in.

That's the thing about life, you don't get to choose to be entirely alone. Other people are going to be your problem one way or anther, you can either ensure they have some hope or you can shoot them trying to steal your stuff, or just clean up the bodies in the street. Take your pick.

Really that is holding me responsible for their life choices, and that is wrong.

Welcome to society its how such things work to a degree. You can whine about it but in the end you have to live with other human beings and their choices will impact you one way or another. Nice to think you can isolate yourself but honestly you can't. Nor can we fix other peoples lives, all we can do is what we are able and willing. A wise person walks a live between taking care of themselves and being useful to society aka others.

As to the widow example, your right they would be considered entering the work force.. maybe even for the first time.
But I don't think you are seriously suggesting that we should form the foundation of our ecconmy on such a fringe example.
I understand that you are combining these 3 above, and even this one falls to a similar objection to the others.

Not sure who said anything about changing the foundation of our economy. All I advocate is we have some concern for the problem and do what we thing will best address it. As I said, minimum wage is a somewhat brute and sloppy method to do that. But I think just hiding behind some anarchist notion of no one helps anyone but themselves in the public sphere is foolish. Life is a game of cooperation and competition both.

I'm still trying to grasp this capital investment point.

I'm saying if you invest in peoples lives early on you can get nice returns and often small investments at that critical stage can have big returns. I don't have kids but I payed for both my wife's education (before we were married), and a friend's ex wife (they payed me back). Now in some cases they can invest in themselves, others some help is useful.

I think job experience is at least a 50/50 shot that your job is preparing you for the next step in that corporate ladder.

Ya, I'd even go higher, but often the lower the pay the less you are likely to learn. It's kind of rare to get a boss who cares much about developing you and your career. I try to be that boss myself but I can only think of one I've had that really fit that mold. None the less a determined learner doesn't always need an active teacher.

I just don't see it as compensation unless you are learning something that is going to advance your career. Not sure how much training a clerk gets on managing a department. Usually its more a matter of you demonstrate good ethic and did good with the current job that gets you promoted. I managed a movie theater at 19 because I was the only person that ever seemed to work hard and give a crap and not because I learned any serious skills.

Anyway, just to keep score your wining on this point, just had some thoughts to share.

I just don't see the capital investment of a decent pair of pants, shirt and shoes as unatainable. If a job is really that low paying they are likely to provide those things, or not care what you ware so as to make handme downs and garage sale level stuff more than acceptable.
Such jobs would probaby have a good shot of not requiring a shirt, much less a uniform.

It depends. At the movie theater (which is generally minimum wage) you had to provide your own shoes, pants, tie and shirt. The butter tended to stain everything after a while (especially white shirts) and that and the kernels from the corn absolutely ruined shoes pretty quickly. Not that I couldn't afford the clothes, but it wasn't helping much with the rent, insurance, food, and tuition I was trying to earn money for.

Again, cell phones etc, the low end jobs we are talking about .. you get picked up at your house by the boss as much as anything else. Working in construction and seeing those that don't get min wage and are basically "black market labor".. they don't need a phone, they are picked up.

Can't say as I ever had a boss willing to drive me to work. The phone is most critical when looking for work really and trying to get different jobs. Not having one is a big disadvantage and its often well worth the price unless you are buying something fancy.

So I think your expectations are inflated as to what kind of work is "bottom of the barrel" work.

I wouldn't think so, I worked minimum wage, did a bit of fruit picking as a kid when that was still legal. I did odd jobs as a young teen all for either min wage or less under the table. I remember when an ex GF once found out I was making $10 an hour she thought I qualified as rich. Been there and done that. Mind you when I got truly crap jobs, I quite immediately. If the pay isn't fair I walk. Honestly if more people did that we'd have less problems.

As to starting a small buisness.. I have seen it done, but it certainly isn't the norm for someone with no experience at all so as to be only worthy of min wage or less.

Yep, its a hard road and again it really helps if you have some support both financial and otherwise. Pretty awesome when it works out though, it's the heart of capitalism really.

Exactly. I started off homeless, that is why I stayed with my parents till I could support myself.

Indeed, and as I mentioned, I think cultural strategies like that are the best solution, the front line if you will. But I think you need a second and third line of attack as well. There does come a point though where you say fine, if you suck that bad nothing we can do to help. I just like to set that bar as low as is practical.

... waaiit a second. What society do you live in? Do all parents or even the average one kick their children to the street at 16? I know it happens, but how common is it?

Not sure. I think its less common now than in the 80s/90s but probably never super common. But it happens enough there are likely a 100K or so teens in that kind of condition. According to this site http://www.dosomething.org/actnow/ti...homeless-youth there are 1.7 million homeless teens in the US. Seems high to me but quarter that and its still enough that a politician should give a **** about it, and personally I think we all should find it a problem and be interested in mitigating it.

And shouldn't we encourage group homes (Ie a co-operation of free people) instead of limiting the freedom and liberty of others in the face of misfortune of a few?

For me its not about liberty of the rich not to cough up some taxes to help out society. I don't feel embattled or put upon. My liberty is about how I live my life not if I contribute to the good of the society I so richly benefit from. But... group living is smart and I think its a good thing to encourage. I rented rooms in my first house to help afford it and I shared houses with people much of my early years. It's a good strategy so I'm all for it.

I would say that is a necissary aspect of a successful ecconomy. But that is achieved through gaining skills and moving up the ladder, not something you should expect at the very start.

Those are the basics of life man, not some nice apartment and a jaguar. Were talking studio apartment and a beater or a buss pass here. you should be able to afford that as a full time worker whatever the salary or you are better off being a criminal, beggar or dumpster diving. Part time work and low pay learning jobs are fine for students but its not enough for living and we all need to grow up and live. Nor should we be thinking 30 is a great age to go solo at.

Pushing buggies shouldn't pay rent and food and car... sorry, it simply isn't worth it.
When I did that I earned enough to pay my car insurance and gas.. and that was about it.

Well then its not a suitable job for an adult.

I worked as a waiter, married with no kids.. and paid all my own expenses. About the time I had my first child I stopped going to college (because I didn't plan on spending another 10 years for my Psy masters).

I could never get a waiter gig, way to big and imposing I surmised. But waiter you can make a living at typically even make a career if you are among the best. Sorry about the school, if you were by buddy I'd have ponied up for you, well at least for the Bachelors.

but what is the cycle of poverty? Is that the "rich dad/poor dad" type thing? As I understand it the biggest contributer to the cycle of poverty.. isn't poverty itself but marrage and children.
Have a child without being married = .. be poor.

Correct again. Yes if you don't have kids at an early age or are raising them alone, your chances of being in actual poverty are really really low. And you have guys like me who have no kids which makes basically pretty easy. Then again, kids are kind of vital for the survival of the species and biologically you are much better off having them when you are 20-30. But these days that often means your career is compromised unless you have family support and our culture is all about independence. No easy answers but ya, on a personal level, use birth control! (I used the shy Geeks hardly ever gets laid method )

It certainly isn't the lack of higher education like college. Personally I feel that college held me back and I would have been richer now if I had gone strait into the work force and started climbing the ladder.

Could be. It really depends on your profession. I think diploma's get too much credit in our culture but none the less they get a lot. Really hard in my line of work to get good gigs without a diploma. Mind you they don't usually care too much what it's in unless you are fresh in the field. Personally I try not to care about education when hiring, I just judge the person and their work experience.

Yes but this also has a bit to do with what the "average" person is going to be. If you enable people to be dead beats, or lazy then we will have an average lazy people.

In my 42 years that is not my experience about how people are. I've never known a motivated person to "go lazy" or very many lazy people who get motivated. I've seen the latter on occasion but almost never the former. Now our systems can make people choose the no-work option because its better economically. When you factor in health care and such it often pays to be poor instead of just above poor. But I think that is far more about people playing the game to their best advantage than being essentially lazy.

Would you rather the average be.
1) Grow up with a single mom, Get knocked up(or knock someone else up) at 16-20, have several children with different people, work pushing buggies with no insentive to advance.
or
2) Grow up with two parents, find a dream and start at the bottom sweeping floors for the privilage of learning a skill, get established and start a family.

Usually people sweeping floors don't learn much or gain much skill. I think that is an unrealistic view. If they gain anything its trust, which is valuable but in a different way.

Now, I'm not saying a min wage does one or the other. I'm saying that isn't that what we should really keep in mind.. what the social effects are actually going to be or have been?

Absolutely. We should do what works best and experiment with what we think will work best. I'm a pragmatist more than an idealist when it comes to politics. Do what works best.

Well, this is sort of a side point to the thread, but I see politicians job as to protect the rights of all people equally regardless of class. The idea of picking one class over another is what "politics" is about, and that is a major cause of the problems in our society.

People on both sides of the class divide agree with you. But which side the state plays favorites with is the question of the hour. The rich see it pandering to the masses and the masses see it pandering to the rich. Honestly, it panders to both and it is supposed to.

As much as Democrats have demonized the rich to achieve their social agenda.. they are still protecting their own version of the "rich". We need to look no further than the bank bailouts for that(as an intersection of dems and republicans protecting rich). A person for the little guy would have paid the mortgage of the little guys(basically guaranteeing it)

The Dems don't demonize the rich, they demonize the rich who don't want to share or who are seen to exploit unfairly. The bail out was not handled so great, many Dems agree with that in fact. The banks have a bit of a Sword of Damocles going on, ruin them and the economy is likely to spiral down hard core. Still, I think we could have done more bottom up and gotten better results for banks and everyone else in that situation.

Instead, they gave the money to the banks who then kicked the little guy out.

Ya, but that was a bipartisan move for the most part. Big business may not always win at politics, but they almost never loose.

That will never come from a min wage though, because in the end it is the jobs that support such a thing that must be created, and min wage demonstrably destroys jobs.
If you want to start a family at a minimum standard you simply can not start it until you have reached the level of skill in the society that supports that.
There are simply too many jobs that need to be done that are not worth the money to support a family. Pushing Buggies is such an example. The job will exist at a very low pay, or it will not exist at all, and customers will do it for free.

Do you agree with that? If not why?

Yes and no. The thing of it is, if you are doing full time work as a human being and its not worth the value of keeping you alive, then there is a serious problem. Capitalism is an equitable exchange of value. If the value of human labor is not enough to sustain human life there is a systematic problem. A tribe in that state would die out. Biology says we should have kids in a certain age range, we can go out of that but it is less optimal. If our society can't support the natural state of a human being then its not well organized.

AKA if a full time job can't earn you a living, no one should be willing to do that job full time who needs to earn a living. Kids and such are another matter, but we shouldn't be extending childhood into the mid 30s.

Do you agree with the buggy pushing example?

Sort of, but there is no point in an adult doing such work if it can't support them.

Would you agree that by raising min wage so as to destroy all buggy pushing jobs will change our culture to one that doesn't expect such a service at all.
If so, how many other such services/industries have been destroyed or maybe just limited? Technical support that speaks english comes to mind.

Minimum wage doesn't destroy those jobs so much as globalization. People aren't so stupid they will work jobs that don't even beat opportunity cost and many people in other nations can make a living on what an Americans opportunity cost is. That is another thing we just have to come to grips with in our economy. We now have global capitalism and supply and demand don't make for low wage american work.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by Sigfried

Not really. You have to consider what criminal and black market activity pays and its risks vs the risks of work as an opportunity cost.

True, we can divide those who lose their jobs due to minimum wage into two categories.

1) Those who do not find the risk/return ratio of illegal activity at all acceptable and thereby have no income. $0/hour.

2) Those who do find it acceptable and now have a return lower than they had before the increase. Those activities produce a lower net return to individuals when compared to legalized work (otherwise they would already be doing them). IE they value the higher pay less than the higher risk.

Originally Posted by Sig

The biggest problems we have in this area stem from broken families. Single parents face significant costs to care for their kids while they are at work, often more than they can earn if they are at the bottom of the wage scale. While we should do everything we can to help avoid the situation itself, we also need to do something to deal with what happens when all that fails.

That is a very interesting point. Aren't we subsidizing that decision not to exist in a family?

Originally Posted by Sig

BTW: In Seattle we recently had on district (the airport) go to a $15 min wage. Should be interesting to see what impact it has. We also have legal recreational pot sales coming soon and I'm very curious to see how that shakes out as well. Interesting times for an Economist.

I saw that response. My guess is that many of the services will move out of Seatac and simply operate there and that many others will just close. If I had to bet, I bet exceptions are coming to that law.

Originally Posted by evensaul

Although I admire the op, the problem I have is that the supportive material comes from Europe where businesses do not run efficient payroll control to begin with.

That is a fair objection. I'll detail a bit more in a follow on post while that data was only a small portion of my supporting evidence. Re-reading the OP it appears to have taken a larger place in how people saw the argument than I meant it too.

Originally Posted by evensaul

Would a minimum wage hike cause them to cut labor hours? Not likely, because they are already running labor hours as low as possible. If they could cut any labor hours, they already would have.

I think this point mis-understands the micro-economic argument. I am not arguing that there are currently "wasted" hours or that companies are not operating efficiently. I am arguing that by changing the price of labor you make hiring of some portion of the labor no longer profitable. Take the video offered as an example. In the video someone is hired to sweep the floors at a factory. They contribute something like $5/hour towards the revenue of the owner and he pays them $4/hour.

But if we mandated a $7/hour wage, why would the employer continue to hire this guy to only contribute $5/hour? Why not simply discontinue the sweeping and cut your loss?

Originally Posted by evensaul

And as a result, all of those companies would have to raise their wholesale and retail prices. That price inflation would offset the increased take home pay of those receiving a wage increase, causing a roughly net zero gain for the employees.

This is the other side of the option I agree. The question is which actually happens? I think the macro data (as shown later) argues more for my story than yours, but let's stick with a praxeological argument for now.

As an employer which would you pick given the increase in the minimum wage? Increasing your prices (and losing customers to a company that has perhaps delayed that price increase (it has a better cash position than you do perhaps)) or cutting off lower skilled workers who provide a benefit that is not longer profitable?

The answer is, probably both.

The real point is, that if they follow my route or yours it doesn't really matter, we both agree that this is harmful to those of the lowest skill groups.

Originally Posted by JimJones8934

What I'm not understanding is how this supports your OP.

I believe that is because you have mis-understood the OP. Rather than reading the entire point you focused on the European data only. That was less than half of the macroeconomic argument I made and completely ignores the micro economic argument. I will attempt to clarify this confusion in my follow on post.

Originally Posted by JJ

And if you did mean that show that CB is better than MW then why not make that explicit.

It is a bit odd that you think this is the argument I'm making in the OP. The OP is 1968 words. The European section is only 119, but that seems to be the only part you noticed.

The argument is clearly an argument against wage restrictions and the implications arising from arbitrarily boosting wages. If you support setting a mandatory floor on wages that is above the market price for that role, you will hurt those who are most vulnerable in our society. If you do it through a minimum wage you will cause that damage, if you do it through a collective bargaining agreement you will harm them. The mechanism is irrelevant, the scale of the price distortion is what is relevant.

Perhaps if I rephrase my Conclusion a bit it will clarify this for you:

So what does all this economic babble mean? I’ll make it brutally simple. If you [restrict the ability of people to freely agree to wages], you support hurting the lowest skilled workers in our economy (generally young minorities) in favor of those who are more moderately skilled. You prevent them from getting a foot on the economic ladder. You prevent them from competing with those who can spend money towards their personal capital.
To use an illustration, generally, you are limiting the options for a young black female and helping a middle income white male (which incidentally, it was originally designed to do).

Originally Posted by JJ

I'm disagreeing that your "Macroeconomic Evidence",

To clarify, you are disagreeing with a small portion of my macroeconomic evidence correct? You did nothing to challenge the large bulk of information from Prof. Neumark or Congress.

Originally Posted by JJ

Whilst it's true that Tonga is different from 1802 and Modern Western Europe, that is not the argument you are making.

You missed the objection both I and Sig made to you hear. You attempted to argue that Tonga's high unemployment "proved that minimum wage doesn't lead to unemployment" because it doesn't have one.

But of course, comparing Tonga's unemployment effect from minimum wage to Europe's current unemployment is a meaningless comparison. Apples and oranges as Sig pointed out. It is an invalid objection. If you wanted to compare Tonga's unemployment effect from minimum wage you would need to compare it to a country of similar economic conditions.

At this point I should note that your "data" was relatively spurious as well. While I thought overlooking that point given the obvious apples/oranges fallacy you were making would be prudent I'll note that Indexmundi isn't exactly a reliable source, which should have been obvious given that it claims the unemployment rate in Tonga during year "3" was 13 percent. Clearly they meant 2003 there, but the data is entered poorly.

Further making your comparison fallacious is that you were comparing Tonga in 2003 to Western Europe in 2013. Clearly that comparison is fallacious both across development and across year group.

Originally Posted by JJ

No, from the Wikipedia article, it pointed to a government website with all the detailed facts about each country and employment rates for each country are easily found. It's all out there. I think a more useful description would be a chart of the minimum wage (or a calculated on from CB countries) vs employment-rate over time. Then the facts should pop out.

So you didn't read the whole OP? You missed the environment scan analysis from Prof. Neumark. You missed Congress's findings related to the nature of academic research in this field. You missed the fundamental underlying microeconomics argument presented. You're saying you missed all of that?

Originally Posted by JJ

I've already mentioned this, an MW has to be greater than the social safety net that a country provides, otherwise there is no incentive to work.

So, in your view, employers can dictate wages to people? IE, if we had no minimum wage, employers would drive down wages to poverty levels? This is called monopsony power in economics, are you affirming that you believe employers have monopsony powers?

Ok, there seems to have been some confusion in the argument I'm making. Several people focused on a relatively small segment of the argument (the European data) and then didn't see the rest of the Macroeconomic data.

I would like to re-highlight that section by expanding it here.

First, Prof. David Neumark of UC Irvine did an environmental scan. This is a procedure where economists (it is also done in other fields like medicine) do a scan of all peer reviewed literature on a subject and attempt to see what the state of the discussion is. Sometimes these types of scans will also use the underlying data sets to do a meta study of the data presented. These types of meta-studies are often far more powerful (in the statistical sense) and accurate for underlying causation. Prof. Neumark did both types of scans during this study.

2) A 10% increase in minimum wage reduces minority employment by 3.9%. That number is composed primarily of teenagers (drop of 6.6%). Blacks suffer the most (-2.8%) and especially black teenagers (-8.4%).

I would specifically point you to table 5 on page 28. This table shows employment elasticity for different groups. You'll notice that those who are younger and a minority (or with low training like a High school drop out) have negative elasticity, meaning that they lose jobs as minimum wage increases. In turn, you'll notice that older, non-minority groups have a positive elasticity, meaning they do get jobs when the minimum wage increases.

So to re-emphasize my conclusion. Increases to the minimum wage (or whatever wage mandating solution you are discussing) benefits older, whiter people at the expense of younger minorities.

The second study I offered was conducted by Congress and studied older economic data (pre-Neumark study). These papers generally also support the notion that minimum wage increases negatively impact the ability of minorities and the young to get employment. They highlight exactly how unique are Card and Kreuger's findings. I would like to post the analysis of the major papers they used:

I think we need to be realistic when engaging in this discussion. There is virtually no question, given the data, that macroeconomics supports the microeconomic view that a higher minimum wage decreases employment, especially employment of younger, minority workers.

Last edited by Squatch347; January 14th, 2014 at 09:02 AM.

"Suffering lies not with inequality, but with dependence." -Voltaire

"Fallacies do not cease to be fallacies because they become fashions.” -G.K. Chesterton

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by SIG

Yep, that was partly my point

Well, it seems we agree on that, but then I don't think I understand to what extent you are arguing for min wage.

So to be clear, you and I agree that it is better to remove restrictions that make it illegal to be poor instead of raising or maybe even having a min wage?

*Note*, I will respond to the rest of your interesting and relevant post, but if we really do agree here, then it is sort of academic yes?
I will hold off that response for this short answer

I apologize to anyone waiting on a response from me. I am experiencing a time warp, suddenly their are not enough hours in a day. As soon as I find a replacement part to my flux capacitor regulator, time should resume it's normal flow.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by Squatch347

JJ: What I'm not understanding is how this supports your OP.

I believe that is because you have mis-understood the OP. Rather than reading the entire point you focused on the European data only. That was less than half of the macroeconomic argument I made and completely ignores the micro economic argument. I will attempt to clarify this confusion in my follow on post.

Then what is the purpose of the European data if it doesn't support your OP?

Your OP is arguing for zero-MW.
The European data is presented that countries without a zero-MW has lower unemployment rates.
But you neglect to mention that those countries don't have zero-MW at all but they have CB.

I don't see how it follows.

JJ: And if you did mean that show that CB is better than MW then why not make that explicit.
It is a bit odd that you think this is the argument I'm making in the OP. The OP is 1968 words. The European section is only 119, but that seems to be the only part you noticed.

It's the part that instantly popped out as being odd. You presented it as evidence to support your OP. And it doesn't, does it?

The argument is clearly an argument against wage restrictions and the implications arising from arbitrarily boosting wages. If you support setting a mandatory floor on wages that is above the market price for that role, you will hurt those who are most vulnerable in our society. If you do it through a minimum wage you will cause that damage, if you do it through a collective bargaining agreement you will harm them. The mechanism is irrelevant, the scale of the price distortion is what is relevant.

Yet you claimed that the CB countries were actually zero-MW countries. If anything, from that example, you are arguing that CB is a good alternative to MW; but that's not what your main thrust is. There is little difference between a government mandated MW and a CB one - they're both above the market price, as you are pointing out.

That doesn't answer the question as to why they are relevant.

Perhaps if I rephrase my Conclusion a bit it will clarify this for you:

So what does all this economic babble mean? I’ll make it brutally simple. If you [restrict the ability of people to freely agree to wages], you support hurting the lowest skilled workers in our economy (generally young minorities) in favor of those who are more moderately skilled. You prevent them from getting a foot on the economic ladder. You prevent them from competing with those who can spend money towards their personal capital.
To use an illustration, generally, you are limiting the options for a young black female and helping a middle income white male (which incidentally, it was originally designed to do).

That doesn't explain why you are offering an argument that CB is better than MW in an OP that is saying zero-MW is better than MW. That's the point I'm trying to get to the bottom of.

To clarify, you are disagreeing with a small portion of my macroeconomic evidence correct? You did nothing to challenge the large bulk of information from Prof. Neumark or Congress.

I'm not disagreeing with anything. I'm just asking why you are mis-representing evidence; why you presented CB as zero-MW. And if it's not a mis-representation, what is the purpose of the comparison.

JJ: Whilst it's true that Tonga is different from 1802 and Modern Western Europe, that is not the argument you are making.You missed the objection both I and Sig made to you hear. You attempted to argue that Tonga's high unemployment "proved that minimum wage doesn't lead to unemployment" because it doesn't have one.

But of course, comparing Tonga's unemployment effect from minimum wage to Europe's current unemployment is a meaningless comparison. Apples and oranges as Sig pointed out. It is an invalid objection. If you wanted to compare Tonga's unemployment effect from minimum wage you would need to compare it to a country of similar economic conditions.

At this point I should note that your "data" was relatively spurious as well. While I thought overlooking that point given the obvious apples/oranges fallacy you were making would be prudent I'll note that Indexmundi isn't exactly a reliable source, which should have been obvious given that it claims the unemployment rate in Tonga during year "3" was 13 percent. Clearly they meant 2003 there, but the data is entered poorly.

Further making your comparison fallacious is that you were comparing Tonga in 2003 to Western Europe in 2013. Clearly that comparison is fallacious both across development and across year group.

I've already agreed to it being apples and oranges - I am saying that these qualifications were not in your OP. I am saying the European 'evidence' is most certainly not similar at all since it actually has CB.

So you didn't read the whole OP? You missed the environment scan analysis from Prof. Neumark. You missed Congress's findings related to the nature of academic research in this field. You missed the fundamental underlying microeconomics argument presented. You're saying you missed all of that?

Well, are you arguing for a zero-MW? If you are then the European data doesn't support that.

I think we need to be realistic when engaging in this discussion. There is virtually no question, given the data, that macroeconomics supports the microeconomic view that a higher minimum wage decreases employment, especially employment of younger, minority workers.

Sure, then remove the European evidence or explain why you included it and how it supports your case.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by JJ

Sure, then remove the European evidence or explain why you included it and how it supports your case.

The connection seems to be that There are countries with a Min wage, and they stack up poorly with those that do not.

Here "min wage" refers to a national fiat mandated rate.

Your objection is semantics. It doesn't weaken the argument or point at all to say "these 9 countries have no min wage, but have different levels of collective bargaining agreements".

The very important distinction is that a collective bargaining agreement is a little more than what an individual does between an employer only on a mass scale(though with a shift in power). So there is going to be some reflection of reality in it, hence it's better track record in the data vs Min wage. Min wage on the other hand is distinguished by it's fiat decree nature, with no connection to the economic nature of free exchanges.

The idea that the gov declares a min wage, is very different from the idea that worker groups and employer groups negotiate a wage. Calling the latter a "min wage" is to confuse the two and ignore relevant distinctions.

I apologize to anyone waiting on a response from me. I am experiencing a time warp, suddenly their are not enough hours in a day. As soon as I find a replacement part to my flux capacitor regulator, time should resume it's normal flow.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by MindTrap028

The connection seems to be that There are countries with a Min wage, and they stack up poorly with those that do not.

Here "min wage" refers to a national fiat mandated rate.

Your objection is semantics. It doesn't weaken the argument or point at all to say "these 9 countries have no min wage, but have different levels of collective bargaining agreements".

Firstly, I am not arguing against the OP. I am arguing that the evidence Squatch presents doesn't support the OP and needs to be withdrawn.

The very important distinction is that a collective bargaining agreement is a little more than what an individual does between an employer only on a mass scale(though with a shift in power). So there is going to be some reflection of reality in it, hence it's better track record in the data vs Min wage. Min wage on the other hand is distinguished by it's fiat decree nature, with no connection to the economic nature of free exchanges.

Let's look at what the OP says again:

Scott Sumner has done some excellent work on the data coming out of Europe, where minimum wage laws vary significantly, and data is relatively reliable.

There are nine countries with a minimum wage (Belgium, Netherlands, Britain, Ireland, France, Spain, Portugal, Greece, Luxembourg). Their unemployment rates range from 5.9% in Luxembourg to 27.6% in Greece. The median country is France with 11.1% unemployment.
There are nine countries with no minimum wage (Iceland, Norway, Sweden, Finland, Denmark, Austria, Germany, Italy, Switzerland.) Five of the nine have a lower unemployment rate than Luxembourg, the best of the other group. The median country is Iceland, with a 5.5% unemployment rate. The biggest country in Europe is Germany. No minimum wage and 5.2% unemployment.

There is no mention of CB at all here -- only that those countries have no MW. However, a CB does provide a lower minimum wage via agreements between unions & employers (not an individual employer & his employer as you're describing). The OP is about not having any lower bar at all and the quote was supposed to have been supporting that argument. It doesn't and he restates as "The argument is clearly an argument against wage restrictions and the implications arising from arbitrarily boosting wages. ". So it's not " that There are countries with a Min wage, and they stack up poorly with those that do not."

A little more troubling is that the CB isn't declared in the quote above - it was only through my own research. Otherwise, I would have assumed that those nine countries have a zero lower limit on wages and it was a free market system. I don't see how anyone could know that those 9 countries have CB. And it's misleading to re-interpret the OP as suggesting countries with MW " stack up poorly with those that do not" since that's not the argument being made nor the context in which the evidence is being presented to support.

The idea that the gov declares a min wage, is very different from the idea that worker groups and employer groups negotiate a wage. Calling the latter a "min wage" is to confuse the two and ignore relevant distinctions.

It is indeed different and that's not what I'm saying - I haven't called CB 'minimum wage' but that it is not zero-MW (which is the context it is being presented as). Also, note again he says "The argument is clearly an argument against wage restrictions and the implications arising from arbitrarily boosting wages. ". CB is definitely restricting wages to a minimum and it is definitely arbitrarily boosting wages. So if that's the case the European 'macroeconomic evidence' needs to be thrown out because it doesn't support the OP.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by MindTrap028

Well, it seems we agree on that, but then I don't think I understand to what extent you are arguing for min wage.

I'm not. I was saying you need to try and solve the problems minimum wage is trying to solve or the politics will dictate we end up with minimum wage because its an easy sell.

So to be clear, you and I agree that it is better to remove restrictions that make it illegal to be poor instead of raising or maybe even having a min wage?

Yes, I think that is a better approach or at least one of a number of things you could do that are better.

If I had to rate the idea of a minimum wage 1 to 10 I'd give it a 3. It helps some people but the more impact it has on the + side, the bigger impact it has on the - side. If you really want baseline wages the collective bargaining solution on a per occupation basis is going to give better results all around since it is a negotiation between labor and business owners to agree on a price most equitable for both.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

Originally Posted by JimJones8934

Then what is the purpose of the European data if it doesn't support your OP?

It does support the OP, you just disagree. Your reason for disagreeing is that the other nations have collective bargaining agreements with certain industries. While that represents a minimum wage for that industry those are not the majority of employees in their economy. Additionally, if you look at the types of industries represented they are generally not low skilled workers and as such not applicable to this argument. Finally, those CB agreements are between workers and employers, Government usually plays a mediator (rather than an arbitrator) role and even that is only in a minority of the countries listed.

In short, your objection fails for the data provided because of its lack of comparable scope. A mutually agreed to bargain amongst some workers is not the same thing as a mandatory wage for all workers.

Originally Posted by JJ

That doesn't explain why you are offering an argument that CB is better than MW in an OP that is saying zero-MW is better than MW. That's the point I'm trying to get to the bottom of.

I feel I need to highlight this again since you seem to have latched onto it. I made no such argument in the OP. That is solely something you invented as a rebuttal. If you are going to maintain that I made this direct argument in the OP, please support it. Otherwise, please stick to the point at hand as represented by my Conclusion.

Originally Posted by JJ

I'm not disagreeing with anything. I'm just asking why you are mis-representing evidence; why you presented CB as zero-MW.

I could ask you the same thing. Why are you representing a mutually agreed to contract as the same thing as a legislated minimum wage? By the definition you seem to imply with your discussion with MT, you would seem to think that even an individual contract for employment is equivalent to a MW since it sets a lower boundary on wages. Obviously that isn't the case, so your point needs some clarification and support. If you are going to argue that they are comparable economically, and thus relevant to the thread, please do so here.

Originally Posted by JJ

I've already agreed to it being apples and oranges

Fair enough, then I'll consider the Tonga point retracted.

Originally Posted by JJ

Well, are you arguing for a zero-MW? If you are then the European data doesn't support that.

This is incorrect, the data does support it as I've outlined above. If you feel it doesn't then make a more credible case as to that claim, simply comparing two economically different phenomena and assuming they are the same is insufficient.

Additionally, if you simply don't find the European data compelling, that is fine, say so and move on to the rest of the argument.

Originally Posted by JJ

Sure, then remove the European evidence or explain why you included it and how it supports your case.

Will you be reviewing and responding to the second part of my OP, or is this as far as you are prepared to argue.

Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

JJ: That doesn't explain why you are offering an argument that CB is better than MW in an OP that is saying zero-MW is better than MW. That's the point I'm trying to get to the bottom of.
I feel I need to highlight this again since you seem to have latched onto it. I made no such argument in the OP. That is solely something you invented as a rebuttal. If you are going to maintain that I made this direct argument in the OP, please support it. Otherwise, please stick to the point at hand as represented by my Conclusion.

You stated that "The argument is clearly an argument against wage restrictions and the implications arising from arbitrarily boosting wages. ". CB does restricted wages to a minimum. So 'restricting wages', no matter whether it is government mandated or agreed upon between a union & a company, is still a restriction, is it not? It makes no difference how that minimum came about - you are are against wage restrictions of all kinds (or at least in that statement you neglect to mention which ones).

So since you are arguing against wage restrictions, the European example makes no sense because you're just comparing different ways in which wages can be restricted.

Please support that a mutually agreed to collective bargaining arrangement is incompatible with a free market system.